Super Retail Group has earnings upside in Rebel and from its new Victorian distribution centre. The addition of a currency tailwind for cost of goods in FY27e supports solid EPS growth. We estimate a 10% lift in the Australian dollar could be a $30 million, or 8% EBIT benefit. It is a 71bp boost to gross margins. While there is some uncertainty given changeover of CEO and a new three-year strategy plan coming, we expect the plan to have few surprises.

Super Retail Group has set a tone for the trading updates across retail. For 1H26e, the company will achieve 4% sales growth, but profit before tax will fall 7%. The weakness is largely attributable to price discounting in Rebel and negative leverage in BCF. The fundamental debate is likely to centre on the sustainability of profit margins. Supercheap Auto has likely peaked and BCF margins are relatively healthy. The turnaround opportunity is Rebel, but competition make it harder to see substantial margin recovery.

Super Retail Group’s FY25 result revealed an encouraging reversal of fortunes in the second-half. While 1H25 EBIT fell 7%, 2H25 EBIT rose 9%. The better gross margin and lower cost growth in 2H25 are likely to support earnings in FY26e. While margins are better, sales trends remain volatile and we only forecast 2% EBIT growth in FY26e. There will be a drag from higher overhead costs. While margins are improving, the sales backdrop is unlikely to accelerate much making it difficult to accelerate earnings growth.

Super Retail Group’s trading update shows a slight slowing in sales but bigger drop in gross margins. The pressure on gross margins is most acute in Supercheap Auto based on our feedback and could carry through to 1H26e.